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Economic prospects: From bleak to bleaker


Economic prospects: From bleak to bleaker

“Namibia has been stuck in a recession since 2016,” reports Jo-Maré Duddy in the Namibian Sun. “The country’s annual economic growth was -0.3% (2016 and 2017); 0.7% (2018) and -1.1% (2019).” The worst is yet to come.

The Bank of Namibia (BON), predicts in their worst-case scenario that an all-time low of -12.2% may be in the offing. BON’s recent economic forecast for 2020 gives a baseline growth figure for the overall economy of -7.8%. Baseline figures are based on current information. If matters worsen, the -12.2% growth rate may be in view. Referring to the 16 July upheaval when the Namibian Stock Exchange’s index dropped by 19.85% due to one investor selling more than 2.6 million Namibia Breweries shares, editor of the Namibia Economist, Daniel Steinmann said such a drop could occur again. “It is highly unlikely but not impossible. The drastic correction in the local NSX index was caused by a single investor. It is possible that other investors may come under pressure if their income is impacted severely by an extended lockdown. Stop the lockdown and the economy will heal itself,” was his advice. In addition, he warned the public to be very careful of new debt. “Liquidate your holdings only if there is no other way out. At some point, the economy, and by implication, the housing market, will correct to realistic levels but this depends to a large degree on current affordability.”

Commenting on the rent versus purchase debate, Steinmann said: “When property prices are high, people will tend to rent. When prices are affordable, most people will buy what their budget allows. If entrepreneurs are considering premises for a business, rent is the better option, but if the aim is to have a family dwelling, then ownership is the better option, provided the monthly instalments are affordable.”

Loide David, Market Research Analyst at Bank Windhoek agrees that it is always better to buy than to rent property, if you can afford it. “Your monthly mortgage allows you to build equity (ownership of an asset of value). You may create a home to suit your personality or lease part of it to generate additional income. For employees with a housing subsidy, it means gaining more benefit from your employer. You can also use the house as security and refinance to fulfil other obligations. By repaying the loan before retirement, you safeguard your financial future, as the value will very likely have increased. Renting, on the other hand, gives you no control over the property, you have no monthly returns and in twenty years you will end up with no asset to your name.”

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